Why is residual income a better measure for performance evaluation of an investment centre manager than return

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Why is residual income a better measure for performance evaluation of an investment centre manager than return on investment?

a. The problems associated with measuring the asset base are eliminated.

b. Desirable investment decisions will not be neglected by high-return divisions.

c. Only the gross book value of assets needs to be calculated.

d. Returns do not increase as assets are depreciated.

e. The arguments over the implicit cost of interest are eliminated.

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Cost Management Measuring, Monitoring And Motivating Performance

ISBN: 1601

3rd Canadian Edition

Authors: Leslie G. Eldenburg, Susan K. Wolcott, Liang Hsuan Chen, Gail Cook

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